University News

Endowment reaches record high

U. posts 16.1 percent return on investment, double its average yield over past decade

By
Senior Staff Writer
Thursday, October 2, 2014

The University’s endowment saw a 16.1 percent return on investments for the fiscal year that ended in June, landing at a record high of $3.2 billion, the administration announced Wednesday.

Brown’s endowment returns are consistent with a period of recent growth, said Chief Investment Officer Joseph Dowling. “Our 10-year average return for the endowment is 8.3 percent,” roughly half of this year’s endowment return, he said.

The 16.1 percent return places Brown toward the bottom of the six Ivies that have announced fiscal year 2014 results so far, though all experienced fairly similar trends.

Yale currently leads the way with an annual endowment return of 20.2 percent, according to the Yale Daily News. Dartmouth followed with a return of 19.2 percent, the Dartmouth reported.

Penn and Columbia had identical returns of 17.5 percent, according to reports from the Daily Pennsylvanian and the Columbia Daily Spectator.

Harvard is currently the only Ivy with a lower endowment return than Brown last year — its endowment grew 15.4 percent, according to the Harvard Crimson.

Cornell and Princeton have not yet released their 2014 returns.

“We’ve made more money in the last two years than the endowment had in its entirety until 1996,” Dowling said, citing the approximately $780 million in investment gains, or profits, made during Christina Paxson’s presidency.

“The endowment’s full recovery from the financial crisis and its uninterrupted support for essential programs in the intervening years is evidence of the University’s strength and resilience,” said Beppie Huidekoper, executive vice president for finance and administration, in the University’s statement.

The Investment Office must consider what is in the best interest for the University, Dowling said. “Our goal is to balance preservation of the endowment with growth of the endowment,” Dowling said. “I would argue that we had an incredibly successful year in that respect.”

“In FY 2013, the financial markets were overall positive, … so it is not a surprise that returns for Brown are positive,” wrote Ken Redd, director of research and policy analysis for the National Association for College and University Business Officers, in an email to The Herald. “We won’t know the full range of endowment returns until sometime next month, but my guess is that returns will be highly positive for many schools.”

The endowment supports about 17 percent of the current operating budget, Dowling said. Every year, 5 percent of the endowment is paid out to the University for operating purposes, he added. The University has relied on endowment funds to support need-blind admission, financial aid, professorships and programs, according to the press release.

This year’s endowment returns mark the second straight year that the endowment has surpassed its pre-recession levels. The endowment stood at $2.86 billion at the end of FY 2013, which also exceeded FY 2008’s endowment of approximately $2.75 billion, as reported by NACUBO at the time.

  • Alumnus

    The S&P 500 returned nearly 22% over that period. If the university wants to announce investment returns for the endowment, shouldn’t they be discussing benchmarks, manager compensation, and asset allocation as well?

  • johnlonergan

    Alumnus makes a good point…this is sub-par performance as compared to other universities, or to the S&P.

    The real story here is that Brown’s endowment is only $3.2 billion, and that it only supports 17% of Brown’s budget.

    This financial performance is sub-par, and it continues Brown’s long slide into financial precariousness (see http://www.browndailyherald.com/2014/10/01/deficit-rises-58-percent-doubles-2014-projection/).

    It leads me to ask a fundamental question: if the current “game” isn’t working, and if Brown is losing ground against its key competitors, isn’t it time to CHANGE THE GAME? Brown is losing top students (40% choose to go elsewhere after being accepted), it is losing top administrators and professors, and it is charging HIGHER TUITION THAN ALMOST EVERY UNIVERSITY IN THE US.

    As Margaret Thatcher once said, things work well until “…we run out of other people’s money.” In this case, Christina Paxson, we’re RUNNING OUT OF MONEY. We can’t continue.

    Brown must do the following:

    1. Expand its revenue base beyond endowment, tuition and government grants. Brown must teach alums, high school students and millions of others around the world–and charge for the privilege.
    2. Reduce its expenses, which have climbed at 3x inflation over the past 30 years (4500 employees for 8500 students!), and

  • Brown Alum

    The real story here is not Brown’s sub-par 16.1% endowment return in fiscal 2014, but the longer term sub-par endowment performance. Brown’s endowment continues woefully to underform most of its Ivy peers by a considerable margin. For the fiscal year ended 6/30/14, Brown’s 10-year average annual return was 8.3%, substantially below Columbia and Yale (each 11.0%), Princeton (10.2%), Harvard (9.4%) and Dartmouth (9.2%) and barely ahead of Cornell (8.2%) and Penn (8.0%). The excuse one hears from Brown’s investment office is that, b/c Brown’s endowment is smaller than its Ivy peers, it needs to invest more conservatively. But, then please explain the disastrous loss following the ’08 crash, which placed Brown, again, at the bottom of Ivy endowment returns. Brown recently took on a new Chief Investment Officer. He needs to be accountable for creating an investment allocation that consistently challenges our peer schools for superior returns. No more excuses, no more rationalizations. Medicocre returns will do nothing but accelerate the slide that Brown seems to be experiencing (see, growing budget deficits, declining ranking, woeful overall performance in sports, etc.).

  • Brown Alum

    Correction to my post yesterday: The endowment 10-year performance stats cited were for the fiscal year ended 6/30/13, not 6/30/14.

  • Degree related to jobs

    Five reasons Americans can’t find jobs
    http://www.foxnews.com/opinion/2014/10/02/five-reasons-americans-cant-find-jobs/

    Increasingly colleges and universities attract students by spending heavily on athletic arenas, flashy student centers and other resort-style amenities. To finance sports spectacles, evening yoga lessons, and ever larger salaries for presidents and coaches, universities jack up tuition and shuffle students into cheap to staff majors, such as art history and sociology, while limiting access to programs with better career potential, like engineering and finance. Too many graduates lack career ready skills and are burdened with excessive debt. In short, liberal arts graduates can’t find good paying jobs. No jobs no donation, less endowments for the university.